Hesterberg says TrueCar.com harms dealers
Photo credit: JOE WILSSENS
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Group 1 Automotive Inc. CEO Earl Hesterberg believes TrueCar.com is harmful to dealers and automakers and questions the online shopping site's value to the industry.
"Their general marketing strategy is to appeal to customers who are interested in buying a car at the cheapest possible price. I'm not sure how valuable that is to me," Hesterberg said during his address Friday at the J.D. Power International Automotive Roundtable.
The dealership group chief's comments come amid a storm of controversy surrounding TrueCar, including probes by several states into whether its business model of guaranteeing online shoppers big discounts from participating dealers violates state franchise laws.
Dealers argue that TrueCar's emphasis on steep discounts has hurt their pricing and margins. Some participating dealers pay the company $299 when a TrueCar new-car lead brings a sale and $399 when a used-car lead brings a sale.
"In seven years at Group 1, I've never had a dealership general manager call me up and say, 'Earl, I need some help. Can you give me some thoughts on how I can give away cars for no profit?'" Hesterberg said, drawing chuckles and applause.
In response to building pressure, TrueCar has said it's getting feedback from dealers and working on changes to its business model. In some states, it has begun charging dealers a subscription-based rate not related to sales volume.
A TrueCar spokesman declined to comment.
It's not the first time Hesterberg has tangled with TrueCar. In December, Group 1, the nation's fourth-largest dealership group, ordered its 111 dealerships to cut ties with the lead-generation site because of concerns over the security of data TrueCar accesses from stores' computer systems.
You can reach Mike Colias at mcolias@crain.com.
